Real estate technology is poised for take-off. It involves any kind of technology that’s involved with real estate, and will change the way everyone interacts with the industry. Proptech has already given us many new tools, but venture capitalists are pouring money into proptech startups that are ready to revolutionize the way we conduct our real estate business.
Real estate technology is a huge field that includes many subcategories. You have tech companies and websites that help you with listings and searches, market analysis, crowdfunding, leasing and loans, property management and much much more. We’re already reaping the benefits, but the proptech realm is expanding and venture capitalists are on the front lines. VC investment surged from $1.8 billion in 2015 and $4.2 billion in 2016 to a staggering $12.6 billion in 2017, according to a report by Re:Tech. (1)
Real Estate Tech Evolves
It’s a technology field that is overflowing with opportunities. As Forbes contributor Louisa Xu points out, “Real estate is the largest asset class in the world — worth more than all stocks and bonds combined — yet it is one of the last to adopt technology.” We’re only on the cusp of a proptech adoption phase, leaving many real estate transactions overflowing with paperwork, offline communication, and old school due diligence. The go-to software program for many people is still Excel, decades after it was first introduced. (2)
Xu separates PropTech into three phases: PropTech 1.0, 2.0, and 3.0 which we are entering now. PropTech 1.0 was born out of the dot-com boom and brought us listing services like Zillow, Trulia, and Redfin. PropTech 2.0 expanded on that exponentially with innovative new ideas like Airbnb, WeWork, and Opendoor. We’re now breaking away from that phase and going into PropTech 3.0 with tech solutions for many aspects of the real estate market, and what Xu calls “pain points.”
She says, each point of “friction” in the property investment timeline provides an opportunity for PropTech. She identifies some of the pain points that need addressing as lengthy timelines to buy or sell a home, high transaction costs, and construction snafus that result in delays and cost overruns. The new wave of companies will help solve those problems. She says, they will “introduce solutions to digitize workflows and elevate transparency for every stakeholder in the ecosystem so that better decisions can be made at a fraction of the cost.”
While the advent of all these tech solutions could make our lives easier, it’s also overwhelming to wade through a vast pool of start-ups promising to make your real estate world a better place. Here are a few that seem to be grabbing headlines:
Hello Alfred is a service for tenants who don’t have time for daily chores, like house cleaning, and errands. It combines technology, for managing tasks, with real people, called Alfreds, who do the work. They will light clean or deep clean apartments, pick up dry cleaning, put laundry away, shop for groceries, pick up mail and packages, take care of pets, or whatever it is that needs doing.
The company also collects data on client preferences, unless clients opt out. For those who don’t, Hello Alfred learns more about the needs of the client so it can anticipate what might be needed in the future. The website entices property managers and landlords to partner with Hello Alfred so that tenants have access to the services. It’s a way to attract upscale tenants who want a five-star hotel-like experience.
The service began in New York several years ago for busy apartment dwellers, but the company just recently raised $40 million in venture capital to expand to new buildings, and cities.
A company called Katerra is hoping to disrupt the construction industry by “optimizing every aspect of building design, materials supply, and construction.” According to the website, Katerra provides start-to-finish design, materials and services — from architectural drawings and custom choices to finishing touches and landscaping. It makes use of modular building components to help reduce costs, control quality, and speed up the construction timeline.
According to the Wall Street Journal, Katerra earned $850 million in revenue last year, had $4 billion in future bookings, and raised more than $1 billion from venture capitalists interested in cheaper and faster construction. The paper says, “If Katerra succeeds in making it cheaper and faster to build housing, that could lead to more new supply and lower rents and home prices.” (3)
Another startup called CheckpointID is hoping to reduce fraud among rental applicants, and just raised $1.5 million to expand its reach into the multifamily industry. CheckpointID is an identity verification service that can be used by property managers to quickly scan and check an applicant’s I.D.
According to CEO, Terry Slattery, in a Real Deal article, “Three percent of all apartment tours begin with a forged ID, which allows potential renters to hide everything from bad credit to a criminal history.” He says, people with forged IDs present a safety risk for agents as well as the entire multi-family property.
There are scores of start-ups in the prop tech space including RentTech and FinTech. Check back for more podcasts on some of these start-ups.
(2) Forbes Article